Meanwhile, wages continue to contribute to inflation, adding 7.2% in the August-October period to the same period a year earlier. The rate of wage growth is down 1.3 percentage points from a peak of 8.5% four months ago, although it remains notably above the consumer inflation rate of 4.6% y/y.
On the other hand, both price and wage growth rates have been held at elevated levels for an extended period (3 years for wages and over two years for inflation), working to raise inflation expectations and making returning to the norm more difficult.
And this divergence creates intrigue ahead of the Bank of England’s looming meeting on Thursday. If the Bank of England acts based on hard data, it should remain in inflation-suppressing mode, warning it is ready to raise rates to bring inflation back on target more quickly.
On the other hand, both price and wage growth rates have been held at elevated levels for an extended period (3 years for wages and over two years for inflation), working to raise inflation expectations and making returning to the norm more difficult.
And this divergence creates intrigue ahead of the Bank of England’s looming meeting on Thursday. If the Bank of England acts based on hard data, it should remain in inflation-suppressing mode, warning it is ready to raise rates to bring inflation back on target more quickly.
However, major peers - the ECB and the Fed - are signalling that they are done with hikes and have moved into a 'wait-and-see' mode, and the Bank of England may announce the same shift in two days.
The #GBPUSD pair retreated towards 1.25 at the end of last week, approaching its 200-day average from above. This week, the battle for the long-term trend has every chance of intensifying, and a bull or bear victory could signal a lasting signal of further Pound movement. A consolidation under 1.25 opens a quick path to 1.22 or even 1.2060.
The ability to hold above due to a strong economy or a hawkish stance from the Central Bank will kick-start a growth momentum with a quick update to 1.27 and the potential to rise above 1.30 before the end of Q1.
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The #GBPUSD pair retreated towards 1.25 at the end of last week, approaching its 200-day average from above. This week, the battle for the long-term trend has every chance of intensifying, and a bull or bear victory could signal a lasting signal of further Pound movement. A consolidation under 1.25 opens a quick path to 1.22 or even 1.2060.
The ability to hold above due to a strong economy or a hawkish stance from the Central Bank will kick-start a growth momentum with a quick update to 1.27 and the potential to rise above 1.30 before the end of Q1.
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A second wave of liquidation of long positions on Monday afternoon hit the #crypto world. Total capitalisation rolled back to $1.53 trillion at the low point against $1.66 trillion on Saturday.
At the low point of the sell-off, #Bitcoin's price was down to $40.1K, nearly nullifying the gains of the previous seven days and touching the former upper boundary of resistance of the two-month trading range. Bitcoin's decline on 11 December was the highest in nine months.
Thus, bitcoin erased the results of last week's acceleration but is still formally clinging to a more global upward trend.
The dynamics of the first cryptocurrency diverge dramatically from what we see in the US and eurozone equity indices. But the big question is, is Bitcoin the canary in the coal mine? A reversal after an acceleration could be a leading signal of a shift in risk appetite. Then, the flight to defensive securities will spread to the equity market very soon.
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At the low point of the sell-off, #Bitcoin's price was down to $40.1K, nearly nullifying the gains of the previous seven days and touching the former upper boundary of resistance of the two-month trading range. Bitcoin's decline on 11 December was the highest in nine months.
Thus, bitcoin erased the results of last week's acceleration but is still formally clinging to a more global upward trend.
The dynamics of the first cryptocurrency diverge dramatically from what we see in the US and eurozone equity indices. But the big question is, is Bitcoin the canary in the coal mine? A reversal after an acceleration could be a leading signal of a shift in risk appetite. Then, the flight to defensive securities will spread to the equity market very soon.
📣Trade responsibly with fxpro.com
⏰ The US Consumer Price Index will be released at 13:30 GMT today. It is expected to slow from 3.2% to 3.1% y/y with 0.0% month-on-month growth. 📉
💭Also, keep an eye on Core CPI, which strips food and energy from its calculations. Here, analysts, on average, expect to see it unchanged at 4.0%
💲 The numbers above forecasts can positively impact the USD, easing expectations of the Fed's policy reversal.🏦
💭Also, keep an eye on Core CPI, which strips food and energy from its calculations. Here, analysts, on average, expect to see it unchanged at 4.0%
💲 The numbers above forecasts can positively impact the USD, easing expectations of the Fed's policy reversal.🏦
Economic Sentiment in Germany Is Improving but Slowly
Fresh business sentiment assessments from ZEW saw the sentiment index rise from 9.8 to 12.8, a positive surprise for analysts who had anticipated a slight decline to 9.6. The current optimism level is the highest since March this year but below the long-term average of 20.8.
Some signs of a reversal can be found in the assessment of current conditions. The corresponding index has risen to -77.1 after -79.9 and -79.8 in the past two months. This is a retreat from a cyclical low but is still at the depressed-low levels seen in early 2020 and 2009.
Wholesale prices fell 0.2% in November after falling 0.7% a month earlier and -3.6% y/y. Negative annual inflation rates over the past eight months have helped to reduce inflationary pressures, allowing the ECB to turn its rhetoric towards greater softness and willingness to cut rates earlier than previously expected.
Fresh business sentiment assessments from ZEW saw the sentiment index rise from 9.8 to 12.8, a positive surprise for analysts who had anticipated a slight decline to 9.6. The current optimism level is the highest since March this year but below the long-term average of 20.8.
Some signs of a reversal can be found in the assessment of current conditions. The corresponding index has risen to -77.1 after -79.9 and -79.8 in the past two months. This is a retreat from a cyclical low but is still at the depressed-low levels seen in early 2020 and 2009.
Wholesale prices fell 0.2% in November after falling 0.7% a month earlier and -3.6% y/y. Negative annual inflation rates over the past eight months have helped to reduce inflationary pressures, allowing the ECB to turn its rhetoric towards greater softness and willingness to cut rates earlier than previously expected.
US Inflation: Without Notable Decline
US consumer prices rose by 0.1% m/m (stronger than expected 0.0%). Annual inflation slowed from 3.2% to 3.1%. Core (excluding food and energy) rose 0.3% m/m, maintaining its annual growth rate of 4.0%.
Overall inflation has stabilised at levels above 3% y/y since June, with no meaningful downward progress. The nominal CPI has added over 1.4% in the meantime.
The core index stabilised at twice the target. Monthly growth rates for the last six months also show no signs of slowing down.
Strictly speaking, with this data, the Fed has no reason to sing a victory song over inflation on Wednesday night. This is moderately positive data for the US dollar, justifying the Fed’s ‘rates higher for longer’ motto. Nevertheless, the markets seem to have saved the main reaction for the FOMC outcome on Wednesday evening, as in the end, it is not so much the data that matters but the central bank’s interpretation of it.
US consumer prices rose by 0.1% m/m (stronger than expected 0.0%). Annual inflation slowed from 3.2% to 3.1%. Core (excluding food and energy) rose 0.3% m/m, maintaining its annual growth rate of 4.0%.
Overall inflation has stabilised at levels above 3% y/y since June, with no meaningful downward progress. The nominal CPI has added over 1.4% in the meantime.
The core index stabilised at twice the target. Monthly growth rates for the last six months also show no signs of slowing down.
Strictly speaking, with this data, the Fed has no reason to sing a victory song over inflation on Wednesday night. This is moderately positive data for the US dollar, justifying the Fed’s ‘rates higher for longer’ motto. Nevertheless, the markets seem to have saved the main reaction for the FOMC outcome on Wednesday evening, as in the end, it is not so much the data that matters but the central bank’s interpretation of it.
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#WaveAnalysis
#CADCHF reversed from resistance level 0.6490
Likely to support level 0.6410
CADCHF currency pair recently reversed down from the strong resistance level 0.6490 (former strong support from October) intersecting with the upper daily Bollinger Band.
The downward reversal from the resistance level 0.64879 stopped the previous minor correction ii.
Given the predominant daily downtrend, CADCHF currency pair can be expected to fall further to the next support level 0.6410 (low of the previous impulse wave i).
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#CADCHF reversed from resistance level 0.6490
Likely to support level 0.6410
CADCHF currency pair recently reversed down from the strong resistance level 0.6490 (former strong support from October) intersecting with the upper daily Bollinger Band.
The downward reversal from the resistance level 0.64879 stopped the previous minor correction ii.
Given the predominant daily downtrend, CADCHF currency pair can be expected to fall further to the next support level 0.6410 (low of the previous impulse wave i).
📣Trade responsibly with fxpro.com
#WaveAnalysis
#EURAUD reversed from key support level 1.6300
– Likely to rise to resistance level 1.6500
EURAUD currency pair recently reversed up from the key support level 1.6300 intersecting with the lower daily Bollinger Band and the support trendline of the weekly down channel from August.
The upward reversal from the support level 1.6300 stopped the previous impulse waves iii and 3.
Given the bullish divergence on the daily Stochastic, EURAUD currency pair can be expected to rise further to the next resistance level 1.650 (which stopped the earlier minor correction ii).
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#EURAUD reversed from key support level 1.6300
– Likely to rise to resistance level 1.6500
EURAUD currency pair recently reversed up from the key support level 1.6300 intersecting with the lower daily Bollinger Band and the support trendline of the weekly down channel from August.
The upward reversal from the support level 1.6300 stopped the previous impulse waves iii and 3.
Given the bullish divergence on the daily Stochastic, EURAUD currency pair can be expected to rise further to the next resistance level 1.650 (which stopped the earlier minor correction ii).
📣Trade responsibly with fxpro.com
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The UK Needs Lower Rates and a Weaker Currency
A series of macro statistics continue to be published to help build a picture of the economy ahead of the Bank of England's final decision on Thursday. The economy is reported to have lost 0.3% for October, pulling back in volume to July levels.
This is a wake-up call from industrial production and construction, which are considered leading indicators of the business cycle. The index of industrial production fell immediately by 0.8% in October (-0.1% was expected), and the nominal index rolled back close to plateau levels from the final quarter of last year. Industrial production is only 0.6% above post-pandemic lows. If we exclude the lockdown period, UK industrial production last saw such a low back in 2017.
High interest rates are putting pressure on the industry.
A series of macro statistics continue to be published to help build a picture of the economy ahead of the Bank of England's final decision on Thursday. The economy is reported to have lost 0.3% for October, pulling back in volume to July levels.
This is a wake-up call from industrial production and construction, which are considered leading indicators of the business cycle. The index of industrial production fell immediately by 0.8% in October (-0.1% was expected), and the nominal index rolled back close to plateau levels from the final quarter of last year. Industrial production is only 0.6% above post-pandemic lows. If we exclude the lockdown period, UK industrial production last saw such a low back in 2017.
High interest rates are putting pressure on the industry.
The strengthening of the pound against the euro by 4% and the dollar by 12% over the year is also not helping the economy. The combination of deteriorating global demand and the appreciating pound is suppressing exports, which were 24% lower in October than a year earlier. Imports are also falling in the wake of commodity and energy prices and are now 18% below their peak in August last year, but the year-on-year fall is a modest 6%.
The UK economy needs stimulus in the form of a weaker GBP exchange rate, which would support the country's global competitiveness and lower interest rates to boost production and domestic consumption. On the other hand, UK prices and wages are rising at the fastest rate among major economies, which prevents the Bank of England from its easing policy.
The UK economy needs stimulus in the form of a weaker GBP exchange rate, which would support the country's global competitiveness and lower interest rates to boost production and domestic consumption. On the other hand, UK prices and wages are rising at the fastest rate among major economies, which prevents the Bank of England from its easing policy.
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This combination of factors leaves the Bank of England no choice but to declare the end of the rate hike cycle and dutifully wait for the shrinking economy to bring inflation down to acceptable levels to start the easing policy.
The British pound has a long-standing downward trend against the dollar, dating back to the times of the global financial crisis. In July and recent weeks, GBPUSD has made its way to resistance. Technically, we can see both a breakdown of this multi-year trend and a reversal to growth, as well as the formation of a powerful downward impulse. The latest macroeconomic data package gives more chances for the second – a pessimistic – scenario.
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The British pound has a long-standing downward trend against the dollar, dating back to the times of the global financial crisis. In July and recent weeks, GBPUSD has made its way to resistance. Technically, we can see both a breakdown of this multi-year trend and a reversal to growth, as well as the formation of a powerful downward impulse. The latest macroeconomic data package gives more chances for the second – a pessimistic – scenario.
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The total capitalisation of #crypto has declined by almost 2% to $1.54 trillion in the past 24 hours. This is still a move in the opposite direction relative to the US and European indices, which are rising. Given that the current year is marked by impressive growth in cryptocurrencies, profit-taking looks like a logical end to it.
#Bitcoin has gained more than 170% from the start of the year to its peak last week. The levels of $38K and $34K look like potential targets for a full-fledged correction. At the same time, locally, Bitcoin is being actively bought back at levels above $40.5K, clearly protecting a significant round level. A failure under it is likely in case of a reversal of stock indices and a widespread thrust from risky assets, which has not been observed yet. The Fed has a chance to influence the situation later on Wednesday with its rate decision, which could determine demand for days and weeks to come.
📣Trade responsibly with fxpro.com
#Bitcoin has gained more than 170% from the start of the year to its peak last week. The levels of $38K and $34K look like potential targets for a full-fledged correction. At the same time, locally, Bitcoin is being actively bought back at levels above $40.5K, clearly protecting a significant round level. A failure under it is likely in case of a reversal of stock indices and a widespread thrust from risky assets, which has not been observed yet. The Fed has a chance to influence the situation later on Wednesday with its rate decision, which could determine demand for days and weeks to come.
📣Trade responsibly with fxpro.com
Weak PPI Is Another Excuse for the Fed to Stay Pat
US producer prices came out weaker than expected, increasing speculation that the Fed may soon turn to policy easing, causing pressure on the dollar.
The overall and core producer price indices showed zero change for November and slowed from 1.2% to 0.9% and 2.3% to 2.0% year-over-year, respectively. This is below expectations and comes as a surprise after the slightly stronger consumer inflation data (which are usually closely correlated).
Producer inflation went to a level that does not worry the Fed and supports a wait-and-see approach. The here and now is a reason for the market to build up risk appetite, suppressing the risks of further rate hikes. But it would be reckless to lose sight of the bigger picture, in which falling commodity and manufacturing prices are a sign of demand problems. And that's bad news for buyers of equities at current levels.
📣Trade responsibly with fxpro.com
US producer prices came out weaker than expected, increasing speculation that the Fed may soon turn to policy easing, causing pressure on the dollar.
The overall and core producer price indices showed zero change for November and slowed from 1.2% to 0.9% and 2.3% to 2.0% year-over-year, respectively. This is below expectations and comes as a surprise after the slightly stronger consumer inflation data (which are usually closely correlated).
Producer inflation went to a level that does not worry the Fed and supports a wait-and-see approach. The here and now is a reason for the market to build up risk appetite, suppressing the risks of further rate hikes. But it would be reckless to lose sight of the bigger picture, in which falling commodity and manufacturing prices are a sign of demand problems. And that's bad news for buyers of equities at current levels.
📣Trade responsibly with fxpro.com
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Have Markets Reached a Peak? Probably Not Yet
The Fed expectedly kept the key rate at the highest level in 22 years in the 5.25%-5.50% range but kicked off a powerful rally in equities and dollar sell-off with a dramatic change in rhetoric. Despite the tight monetary conditions, it gave key indices fuel for a rally. The Dow Jones hit an all-time high above 37200, while Nasdaq100 futures were only 0.5 per cent off their peak set just over two years ago as of Thursday morning.
The rally in stocks that started last Thursday added more than 5.5% to the Nasdaq100 and about 3.5% to the Dow Jones. Confirmation of the Fed’s dovish shift gave additional strength to buyers, and liquidation of short positions by bears caught off guard gave additional amplitude to the move.
The Fed expectedly kept the key rate at the highest level in 22 years in the 5.25%-5.50% range but kicked off a powerful rally in equities and dollar sell-off with a dramatic change in rhetoric. Despite the tight monetary conditions, it gave key indices fuel for a rally. The Dow Jones hit an all-time high above 37200, while Nasdaq100 futures were only 0.5 per cent off their peak set just over two years ago as of Thursday morning.
The rally in stocks that started last Thursday added more than 5.5% to the Nasdaq100 and about 3.5% to the Dow Jones. Confirmation of the Fed’s dovish shift gave additional strength to buyers, and liquidation of short positions by bears caught off guard gave additional amplitude to the move.